European Hydro Power makes sense economically and ecologically

2/5/2002Wien

In principle, VERBUND still believes that the power cooperation between VERBUND and E.ON hydro, whose portion amounts to 37 % of the planned “European Hydro Power GmbH” (EHP), is in no way a “sell out” of Austrian hydro power to foreigners, but rather, that it will economically strengthen VERBUND over the long-term.

The EHP is clearly under Austrian management and will be founded as a corporation according to Austrian law and have its headquarters in Austria, likely in Salzburg. As before, ownership of these power plants will remain with VERBUND or with E.ON.

By contrast with the VERBUND facilities, the E.ON hydroelectric power stations are debt-free. As a result of the cooperation with E.ON-Wasserkraft, the EHP will be fully consolidated in the VERBUND financial statements so that there will be an immediate impact on VERBUND with a 15 percent revenue increase; its results will increase by 25% and its capital equity ratio will be significantly improved. Based on current electricity consumption increases, this means a leap forward in seven years. A strengthened VERBUND can thus be even more active in the battle against greenhouse gases, largely through the expanded, optimized power station operation.

With the expected strengthening of VERBUND to the required European standard, it is also evident that the option of E.ON hydro power – without any timeline – will increase to 49 % of the EHP in cash terms or by including parts of the company from the regional supplier E.ON-Bayern AG. In any case, the exercise of the option again requires approval by VERBUND’s supervisory board.

Regarding reports circulating from the various sides about the VERBUND and E.ON hydro power cooperation, VERBUND would like to stress that - as is the norm internationally - it will make no statement about the content of the agreement as long as negotiations have not been finally concluded.

To date, VERBUND has already recorded more than 50 % of its revenue in neighbouring countries, not the least of which is because former bulk purchasers (particularly österreichische Landes-EVU) have drawn about one-third less VERBUND hydro power since the start of the liberalization of the Austrian power market in February 1999. With their purchasing decision, customers can therefore substantially influence what kind of power production is promoted. If they prefer environmentally-friendly hydro power from a power plant, then they can buy this at any time from VERBUND. With the planned hydro power cooperation of VERBUND and E.ON, all power customers will have the opportunity to meet their energy needs with environmentally-friendly power from hydro power much more so than before. There is absolutely no need - either now or in the future - to import more atomic power.

VERBUND is prepared to establish partnership cooperations with Austrian energy companies; in VERBUND’s opinion, the founding of the EHP does not contradict this. Naturally, VERBUND is open to constructive suggestions.

Regarding the subject of the Kyoto goals, it should be noted that the EU is currently working on guidelines for greenhouse gas emissions. The basis of the calculations are thus emissions, which develop or which are produced in individual EU countries.

Likewise, the EU guidelines that have already been concluded aim to clearly promote energy production in those EU countries where energy is produced.

The decisive factor is therefore where the power will be produced, and not, whether it will be consumed domestically or internationally!

Austria will continue to develop its leading roll in renewable energy. According to the EU definition, hydro power is acknowledged as a 100 percent source of renewable energy.

VERBUND

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